Redevelopment leader says compromise is possible

SACRAMENTO — The head of the state's redevelopment association, signaling a retreat from the organization's entrenched opposition to Gov. Jerry Brown's proposal to abolish redevelopment agencies, told lawmakers Wednesday that there may be room for a compromise in which the agencies would turn over a greater share of their property tax revenues to other local government entities.

"Revenue-sharing might make some sense," said John Shirey, executive director of the California Redevelopment Association, testifying before a Senate hearing on the proposal. "I don't know that it wouldn't be possible to provide more money to schools."

Under redevelopment law, the local agencies capture all of the growth in property taxes from the moment a redevelopment area is created until it is dissolved 50 years later. Over the last 35 years, the share of local property taxes statewide that has gone to redevelopment agencies has soared from 2 percent to 12 percent.

As a result, the nonpartisan Legislative Analyst's Office said in a report released Wednesday that the state now spends an extra $1.7 billion each year on schools to backfill property taxes lost to redevelopment agencies, and other local government entities receive $210 million less than they otherwise would.

Brown proposes to eliminate the state's 435 redevelopment agencies, allow successor agencies to keep enough of their property taxes to pay off existing debt, and divide the remainder of their tax revenue among local school districts, counties, cities and special districts.

The proposal has met with sharp opposition from cities, which control most redevelopment agencies. City officials say redevelopment has revitalized deteriorating downtowns, financed public works projects, spurred economic activity and created hundreds of thousands of jobs.

All that may be true, acknowledged Lois Wolk, D-Davis, chairwoman of the Senate Governance and Finance Committee.

"There is no doubt that there have been good things done by redevelopment, but for us, that's not the end of the discussion," she said. "The question is can we continue to subsidize redevelopment agencies at the expense of schools and core local services?"

In remarks to reporters before the hearing began, Brown said the redevelopment proposal is integral to his overall strategy to permanently put the state back on sound financial footing.

"This package only works with taxes, spending cuts and realignment," he said. "Recapturing the property tax for its primarily intended purpose will save the state money because the things you do at the local level you can do more efficiently."

Treasurer Bill Lockyer, a supporter of Brown's proposal, described redevelopment agencies as "vampire agencies" because they are "sucking the blood of everybody around them for their own particular purposes."

Lockyer told the committee that while the state may want to later restore some of the functions of redevelopment agencies, the best first step is to wipe the slate clean.

"My conclusion is that we should blow this up and start again," he said. "It would be the prudent and smart way to do it. It's better to just reinvent in this circumstance."

Assemblyman Chris Norby, R-Brea, a former Orange County supervisor, said redevelopment money is often used to subsidize private development. He cited as an example a new dive bar a block away from the Capitol where women dressed as mermaids swim in a large tank behind the bar. It was built with a $5.7 million subsidy from the Sacramento Redevelopment Agency, he said.

"As Republicans, we always say, 'Let's cut waste, fraud and abuse,' " he said. "This is a waste. If you're going to cut welfare for the poor, you ought to cut welfare for rich developers also."

Following the four-hour hearing, Wolk said she is not optimistic about the possibility for a compromise, in part because the League of California Cities-sponsored Proposition 22, passed by voters last fall, prohibits the state from redirecting property taxes that go to redevelopment agencies.

She said she would entertain alternative proposals from city officials, but has yet to hear specific ideas. "I'm waiting for them to come forward."